Financial investment, which is determined by restriction for up to a year, is called short-term financial investment.
There are several types of investments:
1. Short-term investment;
2. Long-term investment.
The comparison of these two concepts allows to understand them as well as possible from the economic side.
Financial investment, which is determined by restriction for up to 12 months
These financial investments are usually short-term and can be in effect for up to one year. Short-term financial investments. This line, which is usually used for the acquisition of rights for bills receivable, short-term loans, deposits, securities of particular importance, other financial investments.
Enterprises engaged in the use of the systems of accounts, according to the law should bear responsibility for data reporting of temporary and long-term funds. In this case, the period of balance sheet formation of firm, company will be much simplified by using a detailed division.
Information about the long-term financial investments: duration of service, account type, etc.
As for long-term investments, they have duration for a period of more than 12 months, as opposed to the short-term ones. The sum of long-term financial investments is no different from the short-term financial investments.
It may be concluded that the only difference between two ways described above, is only in their duration. The long-term and short-term investments don’t have any other distinguishing characteristics. The ways of financial investments are chosen depending on the case and the objective, which can be placed before the client.
For example, if the goal of the company is to acquire a long-term source of investment, then the second way of financial investments is more appropriate, and if it plans to use the securities for speculative intention, then the best way is the short-term financial investment. The deposits can also be purchased at different time as well as contraction of loans. It all depends on the desires, preferences and prevalent situations of the customer.